maximising cash flow

Maximising Cash Flow

Sustaining Liquidity

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PAYE/PRSIHere is a list of some of the PAYE/PRSI saving ideas which may benefit you. Employers’ PRSI is charged at 11.05% and therefore if one or more of the ideas below are applicable to your circumstances, significant tax savings may be achieved.

Pensions

• Consider opportunities to enhance pension benefits by increasing employer and employee pension contributions– may generate PRSI savings.

• Planning opportunities may exist in relation to utilising the approved Retirement Funds (ARF) regime for employees’ post retirement income.

Share Based Remuneration

• Consider the use of deferred share schemes, Long Term Incentive Plans (LTIP) for key employees.

• An annual amount of €12,700 can be paid tax free under an approved Profit Sharing Scheme.

• A range of other possibilities exist to provide remuneration in a share based form which may minimise employees’ tax liability

Tax-free Benefits

• Maximise the use of tax-free benefits which include:

– Small annual gift exemption – non-cash benefit (not exceeding €500) which does not attract PAYE/PRSI.

– Tax free reimbursement of business expenses and payments of subsistence.

– Re-training amounts which can be paid tax free as part of a severance package.

– Travel passes.

– Relocation expenses.

Additional PRSI Savings

• Ensure directors with a controlling interest in the company are on a Class S Classification - no employer PRSI.

• Maximise tax-free termination/ex-gratia payments - no PRSI cost.

Cross Border Employees

• Ensure PRSI exemptions are in place where appropriate.

• Ensure that the benefits of double tax agreements are being availed of.

• Consider contractual arrangements to minimise the exposure to Irish income taxes.

• Ensure that tax-free expenses for inbound foreign assignees for the first 12 months are maximised.

Housekeeping

• Ensure all PAYE documents are in place, including PAYE exclusion orders where appropriate to streamline processes and cash flow disruptions.

• Ensure that PAYE returns are filed on time.

• Ensure cash is not wasted on penalties.

Deloitte cash tax strategiesAs you adapt your business plans in light of the current economic climate, a review of your tax position could result in significant savings. In addition to realigning your tax approach with your business plans, every area of tax currently paid should be reviewed for opportunities to:

• Increase or speed up tax repayments

• Reduce or defer tax outgoings

As well as improving the cash position of your business, all strategies should deliverearnings benefits – with VAT and PAYE strategies directly increasing pre tax profits.

Deloitte has a range of cash tax strategies across all taxes. This brochure highlights key areas for savings around Corporation Tax, VAT, PAYE/PRSI, Pensions, Income Tax,

Capital Gains Tax, Capital Acquisitions Tax and Stamp Duty. Your Deloitte contact will be happy to discuss how these ideas can be applied in your organisation, or please consult any of the individuals named.

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VATWe have a range of high value VAT saving ideas that can give rise to significant VAT repayments and ongoing savings, including cash flow savings, for businesses in all sectors. Please talk to your Deloitte contact who will identify and can help implement the appropriate VAT saving ideas that deliver the best value and benefit for your business.

Maximising VAT Recovery

• Review key business areas to improve VAT recovery.

• Improve overseas VAT recovery.

• Review VAT recovery method for partially exempt entities.

• We have tailored software to interrogate accounting records with a view to maximising the amount of VAT recovered.

• Ensure VAT claims are fully maximised.

• Increase VAT recovery on employee expenses and the provision of company cars.

• Opportunities to increase VAT recovery in relation to the acquisition of capital assets by exempt entities.

Minimising Output VAT

• Review VAT rates - are you charging too much VAT.

• Review retailers’ schemes.

• Check suppliers’ VAT rate.

One off transactions

• Review VAT recovery on share transactions/reorganisations.

• Maximise VAT savings on property arrangements.

• Minimise VAT costs on capital transactions.

Cashflow savings

• Accelerate input tax recovery through monthly VAT returns.

• Eradicate VAT costs on intercompany transactions.

• Use all available reliefs both in Ireland and throughout the EU to remove VAT from transactions – e.g Ireland has the 56B and 60A relief.

• Consider accounting for VAT on a cash receipts basis.

Invoicing and Tax Point Planning

• Review the format and timing of invoicing.

• Review self-billing arrangements.

• Consider request for payment, annual invoices etc.

VAT Return Management

• We have a specialised VAT compliance team that can assist with the completion of all VAT, VIES and Intrastat returns which delivers accurate returns in an efficient manner. We can also assist to obtain Revenue agreement to repay VAT refunds in a timely manner.

Customs Duty

• Identify opportunities to lower duty costs.

• Review product classification and valuation procedures.

• Consider availing of Process under Customs Control procedures.

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Corporate TaxThe following outlines various tools/ideas that may achieve corporate tax savings for standalone Irish resident companies, along with planning opportunities to reduce the overall effective corporate tax rate for multi-national groups. These are split into “quick wins” and more long term fundamental structural changes.

Short-term easy winsMaximise Refund possibilities

• Centralisation of functions/activities in Interim PSWT refunds – Expedited refunds can be claimed in case of “particular hardship”.

• R&D tax credits – Tax credit of 25% of the total qualifying expenditure, resulting in an effective tax saving of 37.5% for qualifying expenditure. Cash tax refunds can be claimed for loss making companies.

• Knowledge Development Box – Certain “Qualifying assets” (e.g. Patents, copyrighted software, inventions) can qualify for a reduced rate of 6.25% corporate tax rate.

Compliance/Good Housekeeping

• Ensure the early filing of corporate tax returns where tax refunds are due.

• Set back losses to prior year. File early or consider change in accounting period to accelerate refunds.

• Base preliminary tax computations on accurate information to avoid overestimating the payment requirement. Option available to base preliminary tax based on current year profit projections which may be lower, not based on last year.

• Ensure cash is not wasted on penalties by unnecessarily missing filing deadlines. It is important to continue to file on time.

• Follow up on any refunds due from Revenue.

• Where business is permanently closed, losses may be set back for a period of 3 years (Terminal loss claim).

Tax Depreciation Strategies

• Maximise capital allowances, which are available on plant and equipment at 12.5% p.a.

• Maximise capital allowances on energy efficient plant and equipment.

• Planning opportunities to accelerate tax deduction for refurbishment projects.

• Review expenditure on buildings/leasehold improvements to ensure that the plant element is identified.

Domestic Businesses

• Ensure costs are in the right place for effective deductions.

• Cyclical businesses consider shortening accounting periods.

• Review group structure to ensure that any close company surcharges are minimised.

Medium/Long-termMaximising the 12.5% Rate

• Centralisation of functions/activities in Ireland including the following; – Intellectual property;

– Shared services;

– Financing;

– Procurement;

– Debt factoring;

Tax Efficient Financing

• Consider the use of a financing/treasury company to avail of the 12.5% rate.

• Maximise tax relief on financing costs through appropriate planning – restructure, where appropriate.

• Cash pooling opportunities may exist to minimise interest costs incurred by the group.

• Plan to ensure that withholding taxes are avoided or minimised.

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Asset Protection/Wealth ManagementThere are many ideas listed below to minimise income tax, CAT, CGT and stamp duty on various transactions.

Transfer of Wealth to Next Generation

• Utilising structures to cap the value of assets of the current generation at a low point in the cycle with future uplift in value passing to next generation family

• Consider early transfer for assets likely to rise significantly in value.

• Consider transferring wealth/assets where there has been a fall in property/share values.

• Maximise benefits of CGT Retirement Relief/CAT Business Relief.

• Ensure transfers are structured to maximise the benefit of the CAT/CGT offset.

• Ensure all relevant CAT exemptions and reliefs are availed of e.g. Agricultural Relief/Dwelling House Exemption, Annual Gift Exemption.

Inheritance Tax Planning

• Ensure Inheritance Tax exposures in foreign jurisdictions are minimised.

• Consider restructuring to ensure Business Relief/Agricultural Relief applies.

• Ensure all relevant CAT exemptions are availed of, e.g., Dwelling House Exemption.

Owner Managed Businesses

• Ensure tax efficient return to shareholders.

• Review group structure to ensure that any close company surcharges are minimised.

• Ensure assets are held in most tax efficient manner and in appropriate jurisdiction.

• Planning to ensure tax efficient sale/exit from the business.

Minimise Stamp Duty

• Avail of sub-sale provisions – stamp duty only arises on transfer to end purchaser.

• Transfer by delivery for movable items.

• Avail of Intellectual Property Exemption.

• Claim Associated Companies Relief/Share for Undertaking Relief, where applicable.

• Other planning exists which can be tailored to particular circumstances.

Property

• Consider stock write downs where value has decreased to generate tax deduction.

• Ensure tax relief on borrowings is maximised – restructure if required.

• Many opportunities exist to minimise VAT and stamp duty costs on property transactions.

Personal Finances

• Maximise pension contributions to Revenue approved limits and avail of investment opportunity at low point in valuation cycle.

• Maximise tax relief on financing costs through appropriate planning.

• Consider crystalising capital losses to shelter capital gains arising in the year. For equities reinvestment after four weeks will preserve the loss where you wish to remain invested.

• Consider Income Shelters, e.g., EIIS/Seed Capital/Film Relief.

• Ensure the early filing of tax returns where tax refunds are due.

At Deloitte, we make an impact that matters for our clients, our people, our profession, and in the wider society by delivering the solutions and insights they need to address their most complex business challenges. As the largest global professional services and consulting network, with over 312,000 professionals in more than 150 countries, we bring world-class capabilities and high-quality services to our clients. In Ireland, Deloitte has over 3,000 people providing audit, tax, consulting, and corporate finance services to public and private clients spanning multiple industries. Our people have the leadership capabilities, experience and insight to collaborate with clients so they can move forward with confidence.

This publication has been written in general terms and we recommend that you obtain professional advice before acting or refraining from action on any of the contents of this publication. Deloitte Ireland LLP accepts no liability for any loss occasioned to any person acting or refraining from action as a result of any material in this publication.

Deloitte Ireland LLP is a limited liability partnership registered in Northern Ireland with registered number NC1499 and its registered office at 19 Bedford Street, Belfast BT2 7EJ, Northern Ireland.

Deloitte Ireland LLP is the Ireland affiliate of Deloitte NSE LLP, a member firm of Deloitte Touche Tohmatsu Limited, a UK private company limited by guarantee (“DTTL”). DTTL and each of its member firms are legally separate and independent entities. DTTL and Deloitte NSE LLP do not provide services to clients. Please see www.deloitte.com/about to learn more about our global network of member firms.

© 2020 Deloitte Ireland LLP. All rights reserved.

Vincent McCullaghNational Head of Indirect TaxDublinD: +353 (0) 1 417 2771 M: +353 (0)87 381 [email protected]

Daryl HanberryPartner | Global Employer ServicesDublinD: +353 (0) 1 417 [email protected]

Niall GlynnPartner | Private ClientsDublinD: +353 (0) 1 417 [email protected]

David ShanahanPartner | Corporate & InternationalDublinD: +353 (0) 1 417 [email protected]

Caroline O’DriscollPartner | Corporate & InternationalCorkD: +353 (0) 21 490 7055 [email protected]

Karen FrawleyPartner | Corporate & InternationalLimerickD: +353 (0) 1 417 [email protected]

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